Crown Media Reports Profit in Second Quarter

Ad sales up 16% at Hallmark Channels

By Jon Lafayette -- Broadcasting & Cable, 8/4/2011 9:07:41 AM

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Updated: 12:50 p.m.

Crown Media, owner of the Hallmark Channels, reported a profit in the second quarter after losing money a year ago.

Net income was $12.1 million, or 3 cents per share, compared to a loss of $9 million, or 8 cents a share, a year ago. Revenues were up 16% to $76.2 million.

"We were successful in delivering a solid quarter of financial results, based on a strong advertising market, growth in our subscribers, and our continuing ability to maintain a cost-effective operating structure in order to maximize our bottom line" Bill Abbott, president and CEO of Crown Media, said in a statement. "This profile enabled us to access the institutional markets to refinance our existing debt, significantly lowering our borrowing costs and ensuring long-term stability."

"We are confident in our ability to deliver equally strong results for the remainder of the year," said Abbott, predicting record revenue and earnings for 2011.

Ad revenue increased 16% to $57.9 million. Ad revenues at Hallmark Movie Channel nearly doubled to $8.5 million from $4.2 million.

In the scatter market, prices for ads on Hallmark Channel in the scatter market were 73% above upfront levels, Abbott told analysts during the company's earnings conference call. Advertisers including Home Depot, Pier One, Rite Aid, Pepsi, Birds Eye and Sony Pictures were among the advertisers taking advantage of sponsorship opportunities including holiday specials for Easter, Mother's Day and Father's Day.

Scatter prices on Hallmark Movie Channel were up 43%, with Party City, 1-800 Flowers and Foster Grant buying schedules.

Abbott said the company had completed it upfront negotiations and that both of its networks had met their revenue goals, with volume on Hallmark Movie Channel up 70% from 2010.

Pricing on both networks on a cost-per-thousand viewers (CPM) basis topped the double-digit mark, and the company added more than 20 first-time upfront advertisers.

The company sold about 45% of its commercial inventory in the upfront, compared to about 40% historically. "We have plenty of areas in which to drive price and capitalize on great programming opportunities we have," Abbott said. "We are on target to achieve or 2011 revenue goals if ratings and the scatter markets hold up in the second half of the year."

Crown said subscriber fees increased 14% to $18.1 million, thanks in part to the resolution of a distribution agreement with one multiple-system operator.

Programming expenses increased 20% to $36.3 million. Marketing expenses were $900,000, down from $1.4 million a year ago.